NEW YORK — After the last major banking crisis, some two decades ago, roughly 3,800 bankers were prosecuted and sentenced to prison terms, by the Justice Department’s count. Yet this time, some four years after the economy descended into the most punishing financial crisis since the Great Depression, the public still waits for the Obama administration to deliver a similar kind of justice.
The 2007-’09 financial crisis was “avoidable,” a bipartisan, congressionally-appointed panel concluded last week. Mortgage fraud “flourished” in the run up to the collapse. Securities fraud was apparently widespread.
“Lenders made loans that they knew borrowers could not afford and that could cause massive losses to investors in mortgage securities,” the Financial Crisis Inquiry Commission wrote in its report on the causes of the collapse. About $1 trillion worth of home loans made from 2005 to 2007 were “fraudulent,” the commission said, citing testimony from experts. The Illinois Attorney General, Lisa Madigan, told the commission that she defined fraud to include lenders’ “sale of unaffordable or structurally-unfair mortgage products to borrowers.”
And yet, the perp walk so many Americans crave — Treasury Secretary Timothy Geithner once referred to it as the “very deep public desire for Old Testament justice” — hasn’t occurred. Wall Street figures have largely gone untouched. Bank directors kept their jobs. In a sign that perhaps the fallout from the crisis has passed, outsized compensation is back.
“People need to go to jail,” said Liz Ryan Murray, policy director of National People’s Action, an advocacy organization that helped launch the website CrimeShouldntPay.com. “If you steal something, you go to jail. If you falsify documents, you go to jail. Why doesn’t that apply to big bank executives?”